Inflation Expectations, Learning, and Supermarket Prices: Evidence from Survey Experiments

Cavallo, Alberto; Cruces, Guillermo; Pérez-Truglia, Ricardo

doi:10.1257/mac.20150147

Cited by 243 publications

(265 citation statements)

References 48 publications

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“…Three months later, the average expectations of these treated individuals are still lower than those of the control group, with the effect having dissipated by about 75%, and the effects have fully dissipated after six months. 6 This persistence of information treatments is consistent with those observed in previous work (Coibion et al 2018b, Coibion, Gorodnichenko and Kumar 2018, Coibion, Gorodnichenko and Ropele 2018, and Cavallo et al 2017.…”

Section: Baseline Resultssupporting

confidence: 89%

“…Strikingly, almost forty percent answered that the Federal Reserve was targeting an inflation rate of 10% or more, which suggests a pervasive lack of knowledge on the part of households about the objectives of the Federal Reserve. This is consistent with previous evidence on the knowledge of households and firms in low-inflation environments about monetary policy , Kumar et al 2015, Cavallo et al 2017.…”

supporting

confidence: 92%

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Monetary Policy Communications and their Effects on Household Inflation Expectations

2019

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Section: Baseline Resultssupporting

confidence: 89%

supporting

confidence: 92%

Monetary Policy Communications and their Effects on Household Inflation Expectations

2019

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“…In subsequent research building on these findings, economists have examined how the salience of specific prices can affect overall inflation expectations (76), and psychologists have examined the effects of priming memories of such prices on overall inflation expectations (77). Moreover, our collaboration contributed to the US Federal Reserve launching a new monthly national consumer survey, the Survey of Consumer Expectations, incorporating these jointly developed questions and elicitation methods.…”

Section: Consumers' Expectations Of Inflationmentioning

confidence: 99%

Eliciting probabilistic expectations: Collaborations between psychologists and economists

Bruin

Fischhoff

2017

Proc. Natl. Acad. Sci. U.S.A.

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We describe two collaborations in which psychologists and economists provided essential support on foundational projects in major research programs. One project involved eliciting adolescents' expectations regarding significant future life events affecting their psychological and economic development. The second project involved eliciting consumers' expectations regarding inflation, a potentially vital input to their investment, saving, and purchasing decisions. In each project, we sought questions with the precision needed for economic modeling and the simplicity needed for lay respondents. We identify four conditions that, we believe, promoted our ability to sustain these transdisciplinary collaborations and coproduce the research: (i) having a shared research goal, which neither discipline could achieve on its own; (ii) finding common ground in shared methodology, which met each discipline's essential evidentiary conditions, but without insisting on its culturally acquired tastes; (iii) sharing the effort throughout, with common language and sense of ownership; and (iv) gaining mutual benefit from both the research process and its products.One day in 1995, one of us (B.F.) was standing in line at the National Academy of Sciences Refectory, along with Charles Manski, an economist then at the University of Wisconsin (now at Northwestern University). Manski was complaining about restrictions imposed on the survey questions that he was designing for the 1997 National Longitudinal Study of Youth. To understand adolescents' willingness to invest in their human capital, he wanted to ask them to assess their percent chance of experiencing significant life events that could affect their earning power, such as getting a job as a young adult with or without a high school diploma. However, members of the survey design team maintained that young people could not answer probability questions. They therefore insisted on "easier" response scales, asking adolescents to provide verbal quantifiers, such as "unlikely" and "very likely," instead of percentages. Manski worried that these verbal quantifiers were ambiguous and would elicit responses that could not be compared with actual statistics, making it impossible to tell how well adolescents understood their circumstances. Indeed, Manski saw the constraint as triggering a vicious circle. If he had to ask needlessly vague questions, then the predictive value of his models would be undermined, making it harder to keep his questions on the survey in the competition for space with other scientists. OverviewThe ensuing conversation was the start of a collaboration between economists and psychologists coproducing research that neither discipline could have done on its own. After summarizing the scientific foundations for eliciting lay expectations, we describe two major collaborative projects, one focused on adolescents' expectations for significant life events and the other on consumers' expectations for inflation. We conclude by describing the conditions that we believe have made...

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“…The granular information on 1 Other channels that are not affected by wealth have also been put forward: Wiederholt (2014) suggests that high inflation expectations could be a sign of policy uncertainty and thus depress spending. Cavallo et al (2017) show that the existence of a relationship between inflation expectations and consumption can be explained by rational inattention: when the benefits of forming accurate expectations outweigh their costs -such as in episodes of high inflation -household spending behaviour is more sensitive to inflation expectations.…”

Section: Introductionmentioning

confidence: 92%

Inflation Expectations and Consumer Spending: The Role of Household Balance Sheets

Lieb

Schuffels

2019

SSRN Journal

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Research interest in the reaction of consumption to expected inflation has increased sharply in recent years due to efforts by central banks to kick-start demand through higher inflation expectations. We contribute to this literature by analyzing whether various components of households' balance sheets determine how consumption reacts to expected inflation. Many channels are conceivable: an increase in inflation expectations can raise consumption through direct increases in expected real wealth, e.g. for households with nominal financial liabilities. By affecting the real interest rate, expected inflation can interact with wealth if only those households can adapt their consumption to current real interest rates that are not budget constrained or sufficiently liquid to shift funds between consumption and savings. We use household-level information on balance sheets, vehicle expenditures and inflation expectations from the Dutch Central Bank's Household Survey. We find evidence for a relation between a household's expected inflation and the probability to have positive expenditures on durables. This effect is stronger for households with low net worth. We find no evidence of such effects on the amount of durable expenditures.

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Inflation Expectations, Learning, and Supermarket Prices: Evidence from Survey Experiments

Cited by 243 publications

References 48 publications

Monetary Policy Communications and their Effects on Household Inflation Expectations

Monetary Policy Communications and their Effects on Household Inflation Expectations

Eliciting probabilistic expectations: Collaborations between psychologists and economists

Inflation Expectations and Consumer Spending: The Role of Household Balance Sheets

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